Six out of ten companies on the FTSE 100 and Eurotop 50 indices are considered to be ‘socially responsible' companies, suggests a new fund management study.
Findings of this year’s Morley Fund Management Socially Responsible Investment Matrix reveal the sectors most likely to be found at the top of the chain for good corporate governance and social responsibility are banks, insurance companies, publishers, pharmaceutical manufacturers, telecoms groups and high street retailers.
More specifically, the companies found to have the best active philosophy and management in terms of tackling social and environmental risks and corporate governance are GlaxoSmithKline, Pearson, Reed Elsevier, scoring an A2 rating alongside BT Group, Philips and Severn Trent while scored B1 on the SRI Matrix.
·Started three years ago, the Morley Matrix is designed to encourage listed firms to think more carefully about their SRI position, as the grid rates companies from A to E depending on whether the company’s core business is helpful or harmful to society or the environment and from 1 to 5 to reflect the ‘management quality’ of the firm in relation to social, environmental and governance risks.
The 96 companies who carry A1 and C3 ratings are then considered as possible FTSE 100 and Eurotop 50 investments by Morley’s range of ethical investments, says Melissa Gamble, analyst of the Morley SRI team, as these companies rated highly on the Matrix do take their positions within SRI seriously.
HSBC, for example, is said to have worked hard to move earn its C1 rating over the last two years following a previously poor C4 rating, and is now one of the more proactive companies in terms of more transparent on social and environmental issues, on the FTSE 100 as it has changed its policy on how its lends money on projects such as forestry and dam-building, sharing consumer lending data, to ensure the borrower can afford to repay the loan, and has appointed an individual specifically to deal with SRI issues.
·As a rule, most companies falling within the C3 category or above are better than in past years at disclosing how they manage social and environmental issues and how these issues can affect their business.
However, evidence suggests European companies are stronger on environmental management and reporting while UK companies have higher standards of corporate governance.
Among the examples presented, Marks & Spencer is listed as a C1 company as while it does not recognise trade unions, it already has a strong standards on dealing with labour, and does a lot of work manufacturers and farmers to encourage sustainable practices and sourcing, as well as organic farming.
In contrast, Cadbury Schweppes is placed with a D2 rating as it is considered to have a core business model of products counterproductive to SRI - even though it now owns Fair Trade manufacturer Green & Black’s – as its products are thought to contribute to the obesity crisis.
Gas firm BG Group, which might be considered by some people to be contributing to carbon emission, also received a C2 rating as the study reveals 70% of its product is in natural gas and has strong environmental management, says Morley
At the same time, most oil companies were left on the ‘wrong side’ of the matrix – in the D2 box - Statoil gains a C2 rating as it is thought to have a lower ‘geopolitical’ risk because the firm is 70% owned by the Swedish government and its production is predominantly in Sweden.
Norwich Union’s sustainable investment funds now hold around £800m in assets under management.IFAonline
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